Arbitration Clause held to survive even when Leave and Licence Agreement was mutually terminated

Bombay High Court: A Single Judge Bench comprising of Mridula Bhatkar, J. directed the trial court to refer the matter before it to the Arbitrator holding that it had no jurisdiction to try the suit.

The respondent – original plaintiff – had filed a suit based on an agreement entered into between the parties herein in July 2012. Pursuant to the agreement, the respondent was allowed to use the premises concerned on a leave and licence basis. As per the agreement, any dispute in respect of the transaction was to be referred to  Arbitrator under the Arbitration and Conciliation Act, 1996. Subsequently, the said agreement was mutually terminated by the parties in October 2012. Thereafter, the respondent filed a suit for recovery of security deposit and other claims based on the contents of the said agreement. A Notice of Motion was taken out by the appellant seeking that the civil court had no jurisdiction to try the suit in light of the arbitration clause (Clause 11) as contained on the agreement. However, the trial court dismissed the Notice of Motion and held that the civil court had jurisdiction to try the issue. Aggrieved thus, the appellant filed the instant appeal.

The question before the High Court was whether an arbitration clause survives even after bilateral termination of the agreement? The High Court referred to SMS Tea Estate (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 and Magma Leasing and Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103. It was held that once the parties have intended to refer their dispute to the Arbitrator, then any dispute relating to such agreement must necessarily go to Arbitrator, even if the agreement containing such a clause gets terminated by mutual consent. Consequently, it was held that the trial court had no jurisdiction to try the suit. [Ashok Thapar v. Tarang Exports (P) Ltd.,2018 SCC OnLine Bom 1489, dated 13-07-2018]